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Airlines urged to lower fuel surcharges

Matt O'Sullivan

QANTAS and Virgin Australia are facing calls to lower surcharges on tickets following a 25 per cent fall in jet fuel prices over the past three months.

Australia's largest travel agent, Flight Centre, said airlines had been quick to impose extra charges to cover higher fuel costs but had been slow to respond when they dropped.

Since March, when Qantas last raised its surcharges, jet fuel prices in Singapore have fallen 25 per cent to just $US103 ($A100) a barrel, their lowest level since December 2010. A passenger flying Qantas from Australia to London has to pay $380 in fuel surcharges on a one-way ticket, while on a US flight it is $340. Virgin charges $310 in fuel levies for a flight to Los Angeles.

Although low fares spurred by intense competition have shielded travellers from the surcharges to an extend, Flight Centre said it expected airlines to lower the extra levies when fuel prices dropped significantly.

''It is hard to fathom why they don't decrease as much as they increase,'' a spokesman said.

The strong Australian dollar has also provided Virgin and Qantas with a cushion against the higher price of fuel - their biggest single cost - over the past year because they buy it in US dollars.

Airlines cannot dramatically increase overall ticket prices by raising surcharges because travellers will opt to fly on rival carriers that do not impose the extra fees.

But airlines can boost revenue from people redeeming loyalty points because the schemes often do not cover the fuel surcharges. It means passengers have to pay the surcharges.

A High Court ruling in 2010 forced airlines to include fuel surcharges in the commissions they pay to travel agents on international ticket sales. But travel agents complain that some airlines are still paying smaller margins on the fuel component of the ticket than they would if it was part of the full fare.

Qantas said the surcharges on its tickets were ''appropriate'' because the fuel bill for the group, which includes Jetstar, reached a record $4.4 billion last financial year, compared with $3.6 billion previously.

''We monitor the jet fuel market closely and whenever we change surcharge levels, we make an announcement to the market. However, we do not speculate publicly about what might happen to fuel prices or surcharges in future,'' a spokesman said.

Virgin said it closely monitored fuel prices and considered ''increases or decreases to our fuel surcharges and fares in line with this''.

''We are very conscious of balancing our commitment to providing competitive fares with the operational costs of our business,'' a spokeswoman said.